CoinDesk Crypto

Seychelles-based crypto exchange Huobi has integrated fiat-to-crypto payment service Banxa to its trading platform with zero fees, the firm announced Wednesday. 

• The service will allow users in Australia, the U.K. and the European Union (EU) to purchase cryptocurrency on Huobi’s Buy Crypto page via payment methods available in their respective regions starting Oct. 15. 
• Users can access the new payment gateway on the Huobi OTC site and purchase up to $20,000 worth of crypto in AUD, GBP or EUR to begin trading, and funds can be instantly added to a user’s account using bank transfers, debit or credit cards, and other preferred payment methods with zero fees, the announcement said.
• According to the announcement, users are also required to submit a one-time identity verification as part of the transaction process.
• In the U.K., users can access the service via Faster Payments bank transfers while customers in the EU can use the Single Euro Payments Area (SEPA) initiative and Australian users can purchase via payments platform POLi.
• Huobi, the world’s third-largest crypto exchange by derivatives trading volume, last month launched crypto savings products offering higher interest rates than traditional banking services. 
• Digital banking infrastructure provider Banxa, with offices in Melbourne, Australia and Amsterdam, raised $2 million in a Series A round in January after partnering with Huobi rival Binance, and announced its intentions to expand to the U.S. in July. 
• Ciara Sun, Huobi Global’s head of global business and markets, was set to reveal the integration Wednesday at CoinDesk’s virtual event, invest: ethereum economy.

Related Stories

• CFTC Chairman Heath Tarbert Talks Ethereum, DeFi and the Next BitMEX
• Bloq Enters DeFi World With Simplified Staking Product ‘Vesper’
• Binance’s CZ Views ‘CeDeFi’ as a Complement, Not a Competitor, to DeFi
• Blockchain Bites: Ethereum Power Users, Composability Questions, Staking Solutions

Bitcoin is trending downward while ether transaction activity is showing Uniswap’s influence on the market.

• Bitcoin (BTC) trading around $11,359 as of 20:00 UTC (4 p.m. ET). Slipping 0.38% over the previous 24 hours.
• Bitcoin’s 24-hour range: $11,286-$11,555
• BTC below its 10-day and 50-day moving averages, a bearish signal for market technicians.

Bitcoin’s price dipped Wednesday after a move up to as high as $11,555 on spot exchanges like Bitstamp lost momentum. The world’s largest cryptocurrency by market capitalization then slipped to as low as $11,286 and is at $11,359 as of press time. 

Read More: Bitcoin Steady Above $11,400 as Hashrate Reaches New High

Related: A $10B Firm Makes Bitcoin Its Primary Treasury Asset

On Aug. 18, bitcoin traded at its 2020 high (so far) of $12,475 on spot exchanges such as Bitstamp. Many investors were hoping bitcoin’s uptrend since Oct. 8 would break above that level. 

However, the market has predictably pulled back, at least according to David Lifchitz, chief investment officer of quant trading firm ExoAlpha.

“The road to over $12,000 is not a straight line,” said Lifchitz. “$11,500 was a first target reached, but also the first major roadblock with a heavy congestion zone ahead, between $11,500 and $12,000, the range in which bitcoin has been trading for the full month of August.”

“A small pullback after is normal and healthy in order to reload before the next reach toward $12,000,” Lifchitz added. 

Related: Brainwallets: The Bitcoin Wallet You Probably Shouldn’t Use (Unless You Have To)

Investors expect more volume in the market might help push prices higher. Yet, spot volumes have decreased since late July and into August, when USD/BTC trading activity sometimes could reach as high as $1 billion on a single day.

“Crypto exchange and derivative exchange platforms have seen a month-over-month decline of over 30% from numbers seen as recently as June,” said Zachary Friedman, chief operating officer for trading firm Global Digital Assets. “Generally speaking, the industry is still at a place where retail traders dictate most of the volume. These traders have been seen opting more for a longer term HODL strategy, which has caused a lull.” 

Read More: Fidelity Report Says Bitcoin’s Market Cap is ‘Drop in the Bucket’ of Potential

One metric to keep an eye on is implied volatility, which has been trending lower. “Implied volatility is the expected volatility of bitcoin going forward, which tends to give some insight on how much bitcoin could swing, up or down,” noted ExoAlpha’s Lifchitz.

This means traders have more certainty of price direction – at least for the time being. “Today, bitcoin options one-month implied volatility is around 50%, which is in line with a historically quiet market, meaning that there is, as of now, no drastically bullish or bearish sentiment out there regarding expected bitcoin short-term moves,” said Lifchitz.

Uniswap dominates the ether market

Ether (ETH), the second-largest cryptocurrency by market capitalization, was down Wednesday trading around $375 and slipping 0.68% in 24 hours as of 20:00 UTC (4:00 p.m. ET). 

Read More: Ethereum’s Vitalik Buterin Calls on Power Users to Move to Layer 2 Scaling

The decentralized exchange, or DEX, Uniswap is dominating the ether market when looking at asset flows. Over the past month, over 4.2 million ether changed hands via Uniswap, tops for the network for one entity, according to data aggregator Flipside Crypto.

This activity is a display of the influence Uniswap has on the market. However, Brian Mosoff, chief executive of investment firm Ether Capital, isn’t too concerned about the DEX having so much influence on ether’s market. 

“Uniswap is completely transparent when it comes to trading volumes and metrics,” Mosoff said. “Compare this to alternatives in the cryptocurrency space in centralized exchanges – you need to trust the output of a volume feed that can be controlled by a single person.”

Other markets

Digital assets on the CoinDesk 20 are mostly in the red Wednesday. Notable winners as of 20:00 UTC (4:00 p.m. ET):

• monero (XMR) + 0.56%
• ethereum classic (ETC) + 0.45%

Notable losers as of 20:00 UTC (4:00 p.m. ET):

• 0x (ZRX) – 6.5%
• tezos (XTZ) – 4.8%
• orchid (OXT) – 4%

Read More: In Effort to Differentiate, Litecoin Makes a Move to Privacy

Equities:

• Asia’s Nikkei 225 closed flat, in the green 0.11% as Chinese President Xi Jinping promised further economic reforms on the mainland in a speech.
• Europe’s FTSE 100 ended the day in the red 0.58% as a strengthening British pound, which hurts overseas revenue for multinationals, damped sentiment.
• In the United States the S&P 500 dropped 0.70% amid Treasury Secretary Steve Mnuchin's expectation that more stimulus payments won't happen prior to the election.

Commodities:

• Oil was up 2%. Price per barrel of West Texas Intermediate crude: $41.
• Gold was in the green 0.46% and at $1,900 as of press time.

Treasurys:

• U.S. Treasury bond yields all fell Wednesday. Yields, which move in the opposite direction as price, were down most on the two-year, dipping to 0.139 and in the red 4%.

Related Stories

• First Mover: Privacy Is Litecoin’s Ace in the Hole as JPMorgan Touts Bitcoin
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Token investment platform CoinList minted a total of $57.1 million worth of wrapped bitcoin (4,997 WBTC) in back-to-back mints for its customers Wednesday, setting an all-time record for the most bitcoins wrapped by one merchant in a single day.

• The previous daily record was set on Sept. 18 when Alameda Research minted $44.7 million (4,093 WBTC) in three separate mints, according to transaction data analyzed by CoinDesk.
• Matthieu Jobbé-Duval, head of financial products at CoinList, told CoinDesk the firm is seeing a strong but “more balanced flow” in demand for WBTC after “a steady increase” in customer demand throughout the summer during the heights of the recent decentralized finance (DeFi) craze.
• On Wednesday, CoinList also set a new record for the largest single mint of 3,697 WBTC.

• Notably, CoinList mints WBTC only as a service for its customers, unlike other wrapped bitcoin merchants including Alameda Research, Three Arrows Capital and Grapefruit Trading that primarily deploy the tokenized capital themselves.
• Wednesday’s eye-popping daily minting activity is sort of business as usual for the San Francisco-based company. Responsible for over 30% of all WBTC ever minted, CoinList continues to be one of the largest gateways to using bitcoin on Ethereum.
• Approximately 105,132 WBTC are in circulation, according to the project’s website, representing more than 17,000% growth year to date.

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The U.S. State Department has submitted a proposal to add Ant Group, the fintech arm of e-commerce behemoth Alibaba, to a trade blacklist, Reuters reported, citing two people familiar with the matter.

• The move comes as Ant, a global leader in digital payments, is readying to go public in what could be an offering worth up to a record $35 billion.
• While it’s not clear when the proposal to put China-based Ant on the blacklist will be reviewed, it comes as trade hawks in the Trump administration want to discourage U.S. investors from taking part in the Ant IPO, Reuters noted.
• Why this matters in the crypto world: Besides being a global leader in digital payments, Ant has been working on its own blockchain operations while China is operating at full speed on its own digital currency and its Blockchain Services Network.

Read also: Ant Launches Business Trade Blockchain in Run-Up to $35B IPO

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Blockchain infrastructure firm Bloq is rolling out a new product to make it easier to invest in decentralized finance (DeFi) by asking users to stake their crypto, indicate a risk preference and letting the platform conduct the due diligence and actual farming for them. 

Announced on Wednesday, Bloq’s new platform, dubbed Vesper, is marketed as an easy-to-use platform for DeFi products. The platform will offer users the option to stake ether (ETH), wrapped bitcoin (wBTC) or USD Coin (USDC) using one of its “holding pools,” starting mid-November. 

Jeff Garzik, co-founder of Bloq, said that after depositing their crypto, users could indicate their risk preference between aggressive or conservative, and their crypto would be staked to earn yield. According to Garzik, the DeFi protocols invested in under a conservative risk preference would be well-known ones such as Aave or Compound, whereas an aggressive approach would invest in lesser-known projects with limited due-diligence on their code.

• Initially, Vesper will offer only conservative-strategy pools for staking in mid-November but Bloq said it plans to add other investment strategies and cryptos to the platform in the future. 
• Bloq said the Vesper platform is powered by its native token VSPR, which will be used to distribute rewards among users and developers. While the initial investment strategies will be developed by the platform, it will also invite strategies from developers who can earn rewards in VSPR if their strategy is accepted by the community. 
• The platform itself will charge users 5% on the interest earned on their staked crypto and a 1% withdrawal charge if they choose to cash out of the “holding pools.” 
• “It’s the simplicity, the passive income and the kind of ‘set it and forget it’ type of product,” said Garzik. He said Vesper’s approach was somewhat like the one followed by stock market exchange-traded funds (ETFs), wherein the due-diligence on the investment product is largely done by the issuer.
• Garzik announced the product at CoinDesk’s invest: ethereum economy virtual event.

Related Stories

• CFTC Chairman Heath Tarbert Talks Ethereum, DeFi and the Next BitMEX
• Binance’s CZ Views ‘CeDeFi’ as a Complement, Not a Competitor, to DeFi
• Blockchain Bites: Ethereum Power Users, Composability Questions, Staking Solutions
• Ethereum’s Vitalik Buterin Calls on Power Users to Move to Layer 2 Scaling

BitCluster, a cryptocurrency mining company in Russia, is setting up shop where few dare to wander.

A new mining farm above the Arctic Circle, in the industrial area of Norilsk in the Taymyr Peninsula, will provide 11.2 megawatts of power for mining bitcoin. The farm will be working as a “mining hotel,” meaning that it will be hosting application-specific integrated circuits (ASICs) for customers, charging them for electricity consumption. 

The farm will occupy the land of the now-closed nickel smelting plant owned by Nornickel, the Russian mining and smelting corporation that has been actively exploring the blockchain and crypto space, and that plans to sell tokens backed by metals in the U.S. and Switzerland. The nickel plant was shut down due to environmental concerns. Nornickel did not respond to CoinDesk’s request for comment by press time. 

Related: Bank of Russia Seeks Limit on Amount of Digital Assets Retail Investors Can Buy

Read more: Russia’s Latest Draft Bill Would Still Largely Ban Crypto, Stifle Miners

BitCluster’s farm will expand its capacity to 31 megawatts next year and will use the venue of the former nickel plant, company spokesperson Tatyana Arestova told CoinDesk. Right now, 150 ASICs of Bitmain’s latest model S19 are on their way to Norilsk. 

The first client will be from China, she added. BitCluster is now working on the logistics to move that client’s mining machines from Sichuan province to Norilsk, where the price for electricity is quite cheap, at less than 4 cents per kilowatt/hour. The client’s name was not disclosed.

“On Oct. 24, the rainy season in China ends,” Arestova said. “So they will have their electricity tariffs raised. Chinese miners will start moving around, looking for better tariffs.” BitCluster might have a small bunch of its own ASICs in the venue, too, but that will be a small part of the entire farm, Arestova said.

Related: Digital Ruble Can Help Track Government Spending, Bank of Russia Says

The plans got the blessing from Norilsk’s local authorities. Alexander Pestryakov, the chairman of the Norilsk city council, said the mining farm’s launch is “only the beginning of the digital reality of Norilsk,” as quoted by Norilsk’s newspaper, Zapolyarnaya Pravda, which earlier announced the opening of the mining farm.

“The construction of data centers in the Arctic will attract large investments there, which will undoubtedly become a driver of regional development,” Pestryakov said.

Read more: Meet the Russian Oligarch Launching a Metal-Backed Crypto Token

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Cryptocurrency exchange Binance’s latest experiment to integrate decentralized finance with its centralized platform, Binance Smart Chain, is not here to beat DeFi, said the company’s CEO, Changpeng “CZ” Zhao. Instead, it aims to accelerate crypto and DeFi’s mass adoption.

“Today, 99.9% of the money is still in fiat,” said Zhao in a one-on-one session with CoinDesk’s Leigh Cuen, during CoinDesk’s invest: ethereum economy virtual conference Wednesday. “So in order to get those money in, we still need (fiat) gateways.”

Too early for ‘meaningful’ competition

Binance announced the launch of Binance Smart Chain, its version of a decentralized public blockchain, in early September. Some argued the biggest centralized exchange’s aggressive moves into the rapidly growing DeFi space was its attempt to become an Ethereum killer.

Related: CFTC Chairman Heath Tarbert Talks Ethereum, DeFi and the Next BitMEX

Zhao defended his company, saying that crypto adoption is in its early stages and thus any competition within the space is meaningless. 

“Competing within the 0.1% is not that meaningful,” Zhao said. “So from a high-level perspective, we don’t really view other projects as competition.”

Read more: Binance CEO Says He Fully Expects DeFi to Cannibalize His Crypto Exchange

As of now, the majority of so-called DeFi projects – decentralized, blockchain-based trading and lending applications that theoretically could one day take over the traditional financial market – have been built on the Ethereum blockchain, the second-largest blockchain by market capitalization. With the rise of the DeFi sector, many more are looking to build Ethereum alternatives as an effort to take at least part of that market share.

Related: Bloq Enters DeFi World With Simplified Staking Product ‘Vesper’

Zhao claims Binance Smart Chain, although much less decentralized than Ethereum due to its Proof-Of-Staked-Authority (PoSA) consensus, mitigates the scalability problem of Ethereum, which has significantly slowed down the growth of the DeFi sector.

“I think Ethereum 1.0 is pretty much fully congested,” Zhao said. “Even if we don’t do anything, even if there is no competition, there is not going to be a lot more traffic on the blockchain. … So we view that Binance Smart Chain is taking some load off Ethereum, the volumes that were supposed to get on that but couldn’t get on there.”

Zhao said he and his company are “very hopeful” about Ethereum 2.0 but added that Ethereum 2.0’s answer to the scalability issue will be “long-winded.”

‘Many degrees of decentralization’

Zhao praised the innovation of DeFi projects but said they only target certain users, making it still “a niche thing,” while centralized exchanges like Binance appeal to novice crypto users who are not comfortable with holding their own crypto keys.

“If we look at the number of users, the most popular DeFi, Uniswap, is about 10,000 to 30,000 users maximum,” Zhao said, “whereas most others are 1,000 or a couple hundred users per day.”

Read more: Decentralized Exchange Volume Rose 103% in September to Record $23.6B Even as Growth Consolidated

Zhao said he hopes Binance Smart Chain could attract more people into the crypto space by taking advantage of features centralized and decentralized exchanges can offer. He had previously called the idea “CeDeFi,” a portmanteau of centralized and decentralized finance.

In developing Binance Smart Chain, Binance had to sacrifice elements of decentralization, which is one of the major criticisms of the public blockchain, yet Zhao argued that decentralization is not always “black and white.”

Binance Smart Chain is controlled by 21 node operators, which are elected by Binance Coin (BNB) holders. And the company is one of the largest holders of the BNB Tokens, meaning it still has significant control over the blockchain.

“I view that there are many degrees of decentralization,” he added.

Related Stories

• Blockchain Bites: Ethereum Power Users, Composability Questions, Staking Solutions
• Ethereum’s Vitalik Buterin Calls on Power Users to Move to Layer 2 Scaling

Speakers:

Related: WEF Releases Report Assessing Global Blockchain Standards

Douglas Arner, University of Hong Kong
Sunayna Tuteja , TD Ameritrade
John Cho, Ground X
Simon Hawkins, Latham & Watkins LLP
Alan Xin, CoinDesk China

Moderator: Michael Barr, University of Michigan

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Invest: ethereum economy, a full day of conversation, workshopping and networking around the future of money, is streaming live today until 6:30 p.m. ET.

Today’s special edition of Blockchain Bites is covering all the news you need to know from invest, as well as the Top Shelf (down below) crypto news from elsewhere in the crypto-verse. 

The most in-depth conference to date dedicated to the Ethereum economy is a gated event. You can register now to gain access to the day’s panel as well as video-on-demand content released in the coming days. 

Related: Ethereum’s Vitalik Buterin Calls on Power Users to Move to Layer 2 Scaling

Now, what you need to know from invest: ethereum economy.

Invest news

Power users
In the face of Ethereum’s recent rocketing transaction fees, Vitalik Buterin called for users to move over to scaling solutions that are “already here for many classes of applications.” Speaking at the opening keynote of invest: ethereum economy virtual conference, Buterin reiterated his enthusiasm for so-called layer 2 scaling solutions such as “rollups,” which essentially keep transaction data on-chain while pushing the computational load off the chain. “If you’re listening to this and you are an exchange or you are a wallet or you are a mining pool or you are a major user – even just a regular – then you should be aware of what rollups are and what they do,” said Buterin. “Basically, what your strategy is, in terms of moving over to them.”

Staking solution
Blox, a non-custodial Ethereum 2.0 staking platform, is developing a solution that will allow users to pool their ether (ETH) cryptocurrency to get past the threshold required for staking when the upgraded network goes live. Staking on the much anticipated Eth 2.0 upgrade requires a minimum of 32 ETH in order to participate and is expected to see an estimated 4.6%-10.3% rate of return on a user’s initial stake. Blox’s solution, built alongside the Ethereum Foundation, utilized “secret shared validator” nodes to allow users to aggregate their ETH and reach the required 32 ETH to stake on the network. “Allowing ETH stakers to join the network and generate rewards with any amount of ETH is pivotal for making Eth 2.0 accessible for everyone,” said Blox’s CEO Alon Muroch.

Composability questions
Will composability work as well on Ethereum 2.0 as it does now on the original version of the world computer? The ease of composability is running up against the reality of Ethereum’s throughput capacity, CoinDesk’s Brady Dale reports. To rectify that, some projects are moving to sidechains, but many look forward to Eth 2.0 providing massively more room for transactions to go through. The core of the new throughput capacity will come from a new architecture called “sharding.” Effectively, there will be multiple blockchains that check-in with each other via a beacon chain. Though there are still hard questions to answer. Dale digs in.

Related: Blockchain Bites: Your Guide to Invest Ethereum Economy

Rolling out rollups
Ethereum’s top dapps are increasingly turning to rollups to solve scaling impediments, CoinDesk’s Will Foxley reports. A rollup is an off-chain aggregation of transactions inside an Ethereum smart contract. Ethereum users can transact inside the contract with security guarantees their transactions won’t be misused and they will settle to the mainchain. The main advantages of transaction aggregation for dapps were witnessed this summer as the average Ethereum transaction fee broke historical records numerous times. Though these methods – typically Zero knowledge proof rollups (ZKR), relying on math, and Optimistic rollups (OR), relying on financial incentives – come with their own drawbacks.

The ledger

Tim Ogilvie is the CEO of Staked, which runs staking infrastructure for institutional investors, exchanges, custodians, and wallets. In this excerpted essay, he argues once Ethereum 2.0 rolls out, ETH holders will be incentivized to stake their bags, rather than hold or trade it, because the rewards are higher.

High stakes

Tokenized staked ETH is going to replace ETH itself. 

Ethereum is finally set to shift from a proof-of-work infrastructure to proof-of-stake. The end result of this upgrade will effectively take ETH out of circulation, replaced by a tokenized version of itself. 

In almost every instance that you can imagine people wanting to hold ETH, it will be preferable to hold a staked version rather than the original real asset. This tokenized version of ETH will perform all the same functions of ETH, but it will also be more valuable, because it will earn staking rewards and can simultaneously do other things. 

Rather than remain on its own, separate island, staked ETH will inevitably be tokenized and form the bridge that will bring Ethereum 2.0 across to its killer app. 

Compelling returns
Ethereum 2.0 is a big deal. A blockchain with the size and value of Ethereum has never transitioned users and assets to a completely new network while the previous version continues running. The notion, therefore, of replacing ETH may sound foreboding. 

But, in fact, it is positive in three key ways: Now users will be able to secure the Ethereum network by staking, earn yield for doing so, and have the ability to use that ETH as yield-generating collateral elsewhere. 

Ethereum advocates may chafe at the idea due to a preference for users only to stake. But the outcome is the proverbial win-win. The security ramifications are significant for Ethereum because staked ETH creates additional incentives to stake ETH and simultaneously participate in DeFi activity. That’s a good thing. In the end, securing a network is what proof-of-stake is all about.

There has been a proliferation of PoS networks, such as Polkadot, Cosmos, and Tezos, among others, but none come close to the significance of Ethereum. It is no wonder there is increasing attention on the approaching day Ethereum 2.0 goes live. Although there have been delays and progress hasn’t always gone smoothly, the testing has now been robust and the results raise the confidence that the new network will be ready within only a few weeks. 

At Staked, we run 25 other proof-of-stake networks. But the size and complexity of running Ethereum 2.0 staking infrastructure is like none other. That said, every indication is Ethereum 2.0, phase 0, is now ready for prime time, starting with the deposit contract. Once testing for Ethereum 2.0 is complete, a validator deposit contract will be created on ethereum.

This deposit contract is where all users interested in being a validator for phase 0 can lock in their ETH.

Many in the space will be attracted to the staking rewards. Ethereum 2.0 uses a sliding scale for staking rewards. We estimate yields will be between 8%-15% annually. That’s not as eye-popping as YOLO-ing into the latest DeFi craze, but offers lower risks and predictable returns that will appeal to larger institutions.  

In it for the long haul
So, faced with compelling rewards, a word of caution is required. Staking, at least initially, may not be for everyone. Ethereum 2.0 requires many servers (one for every 32 ETH you stake), significant technical resources to ensure all those servers are always available and secure, and funds that will not be liquid until Ethereum 2.0 reaches phase 1, which could be years away.   

It is a simple but important fact: once ETH is transferred to the Ethereum 2.0 network, it cannot be transferred back to the original Ethereum blockchain. This one-way trip means your funds are not liquid, so the only direct activity available is to participate in staking. 

This is why we should expect tokenized staked ETH. Staked ETH indeed does have to remain locked away until further Ethereum 2.0 developments. But the world of DeFi won’t wait. Staked ETH will be tokenized and will replace ETH. It is not a case of if, but when.

Top shelf

Crypto allocation?
Fidelity Digital Assets said bitcoin’s market cap has plenty of room to grow in a Tuesday report on the benchmark cryptocurrency’s uncorrelated nature. Director of Research Ria Bhutoria wrote that the crypto’s current market capitalization “is a drop in the bucket compared with markets bitcoin could disrupt,” arguing further that crypto is “fundamentally less exposed” to the “economic headwinds” that other assets will likely face. Bitcoin is therefore a “potentially useful” asset for uncorrelated return-seeking investors. “In a world where benchmark interest rates globally are near, at, or below zero, the opportunity cost of not allocating to bitcoin is higher,” the report said.

Grayscale results
Digital asset manager Grayscale Investments has posted its best quarterly results to date, having brought in just over $1 billion in investment across all of its cryptocurrency products. In its financial report for Q3 2020, the company – which is owned by CoinDesk’s parent firm Digital Currency Group – said it had seen inflows of $1.05 billion across all products. For the year so far, the figure stands at $2.4 billion, which Grayscale said is more than twice the total amount raised for the years 2013-2019. Its most popular product, the Grayscale Bitcoin Trust, saw inflows of $719.3 million in the third quarter, while bitcoin assets under management (AUM) have grown 147% in 2020.

Retail interest
Square’s recently announced $50 million investment in bitcoin (BTC) is a “strong vote of confidence for the future of bitcoin” and a signal the payments company sees “a lot of potential” for the cryptocurrency as an asset, JPMorgan analysts said in a report dated Tuesday. JPMorgan’s global market strategists wrote that Square is likely to make more purchases, with other payment firms following in this direction to avoid being shut out of a growing market. While noting that options contracts to BTC have risen, due to institutional interest, the JPMorgan strategists said retail traffic is likely driving the surge in options.

Major investor
Venture capitalist Tim Draper’s investment office Draper Goren Holm is sinking larger investments in virtual currency-only startups. Draper Goren Holm, a cryptocurrency investment firm in Los Angeles, said that it raised $25 million for its first venture capital fund to buffer its startup accelerator and back blockchain companiesat higher investment valuations. The venture fund, announced last week, is planning to invest $250,000 to $500,000 in seed, Series A and a few later investment rounds, the firm said, whereas the accelerator funds pre-seed rounds for between $10,000 and $50,000 and 4% to 10% ownership stakes in startups.

Banking blockchain
After the latest addition of 42 banks, about 100 Italian banks are officially operating on the country’s banking blockchain network, Spunta, built on R3’s Corda, the Italian Banking Association (ABI) announced Tuesday. Banks first joined the blockchain project designed to improve interbank data transfer and settlement speeds back in March 2020 and by May, 55 banks had joined the network. According to ABI’s announcement, since March 204 million transactions were processed on Spunta’s infrastructure, and the association predicts this number will exceed 350 million by the end of the year. 

Quick bites

• 300 Investors Contribute to INX’s Ethereum-Based IPO, With More Waiting (Nathan DiCamillo/CoinDesk)
• Validator Vote Transitions NEAR Protocol to Proof-of-Stake Mainnet (Will Foxley/CoinDesk)
• Libra’s two-year delay (Leo Jakobson/Modern Consensus)
• The Ownership Economy (Jesse Walden/Bankless)
• Even More Satoshi-era Bitcoin Moves—What's Going on? (Liam Frost/Decrypt)

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In the face of Ethereum’s recent rocketing transaction fees, its founder and chief scientist, Vitalik Buterin, called on users of the second-largest blockchain to move over to scaling solutions that are “already here for many classes of applications.”

Buterin took the opportunity while speaking at the opening keynote of CoinDesk’s invest: ethereum economy virtual conference, to reiterate his enthusiasm for so-called layer 2 scaling solutions such as “rollups,” which essentially means keeping transaction data on-chain while pushing the computational load off the chain. 

Given that Ethereum’s roadmap for scaling the base layer of its blockchain with a technique called sharding seems to be some years away, Buterin said it was imperative users start supporting rollups. 

Related: Blockchain Bites: Ethereum Power Users, Composability Questions, Staking Solutions

“If you’re listening to this and you are an exchange or you are a wallet or you are a mining pool or you are a major user – even just a regular – then you should be aware of what rollups are and what they do,” said Buterin. “Basically, what your strategy is, in terms of moving over to them.”

The explosion in decentralized finance (DeFi) platforms running on Ethereum has caused the cost of transaction fees to skyrocket in recent months (transaction fees have increased from 8 cents at the start of this year to highs of around $14 in September). Meanwhile, there’s pressure from other competing base-layer protocols like Polkadot, Cosmos and Blockstack. 

Buterin praised both “optimistic rollup solutions” and ZK rollups, which use zero-knowledge-proof technology, adding that using these solutions on the current Ethereum blockchain can increase transaction throughput from about 15 transactions per second to between 1,000 and 4,000.

“In terms of where we are now, for simple payments we are actually there, like you can do ETH transactions inside rollups. The challenge is just getting everyone to actually move over,” Buterin said. “Generic EVM [Ethereum Virtual Machine] application smart contracts are a bit further behind.”

Related: High Gas Fees Prevent Ethereum From Being Ethereum

Buterin did not elaborate on when Ethereum’s move to proof-of-stake (PoS) would actually take place, other than saying phase 0, involving an independent beacon chain as a proving ground, will happen “very soon.”

The operator of the Zinken test network recently said that following a rehearsal in mid-October, a beacon chain would launch within about six weeks.

Looking ahead to PoS, Buterin said stakers could expect to be net-profitable as long as they stay online at least 50%-60% of the time. “Some of the other proof-of-stake chains that are coming out [are] saying if you’re offline for 12 hours you get slashed, which kind of, I think, is absolutely insane,” he said.

The more coins staked, the more resources and complexity to be expected, Buterin said. That’s because the staker of 10,000 ETH will participate in many more parts of the chain than someone just staking 32 ETH, for example.

“This is a natural consequence of how sharding works and it’s actually a feature that we really like,” he said. “ETH 2.0 strives to be maximally little-guy friendly.”

Buterin was also enthusiastic about Ethereum’s proposed fee market reform (EIP 1559), which will experiment with a flexible block size cap. That, he said, will make fees a little bit less volatile and block sizes slightly more volatile.

In addition, Buterin said, since the fees get destroyed, or “burned,” (“a really interesting change for how things work today”), it’s “very likely the amount of ether getting burned from fees is going to exceed the amount of issuance going to stakers” at current usage levels.

Comparing Ethereum in this respect to Bitcoin’s reducing supply of coins over time, Buterin added: “Over the last three months, if this is new normal, then after proof-of-stake the ETH supply is decreasing.”

“The running joke here is that if a fixed-supply currency is a sound money, then a cryptocurrency that has decreasing supply is a supersonic money,” he said.

Also read: Opinion: Tokenized Staked ETH Will Replace ETH – And That’s a Good Thing

Related Stories

• Blockchain Bites: Your Guide to Invest Ethereum Economy
• First Mover: Privacy Is Litecoin’s Ace in the Hole as JPMorgan Touts Bitcoin

July’s Twitter hack and bitcoin scam should impel corporates and even governments into more forcefully counteracting the “weaponization” of social media giants, the New York State Department of Financial Services said Wednesday.

“The Twitter hack demonstrates, more than anything, the risk to society when systemically important institutions are left to regulate themselves,” NYDFS said in its final report.

• Researchers were troubled the hackers (allegedly teenagers) could break into Twitter, co-opt major accounts and spread a scam using only “basic techniques.”
• The hack, whose backers launched a double-your-money bitcoin scam, only netted $118,000 in crypto. But it brought Twitter “to its knees” and in so doing exposed its inadequate security mechanisms, NYDFS said.
• NYDFS said governments and regulators should bolster their cybersecurity safeguards, treat cyber as “critical infrastructure” and closely monitor “systemic threats” against the social media giants.
• “The time for government action is now,” NYDFS said.

This is a developing story.

Related Stories

• Grayscale Announces Best Ever Quarter With Over $1B Raised
• If This New Tech Works, You Won’t Need 32 Ether to Earn Staking Rewards
• WEF Releases Report Assessing Global Blockchain Standards
• Gate.io Unveils Hardware Crypto Wallet With Fingerprint Authorization

At stake

Invest: ethereum economy, a full day of conversation, workshopping and networking around the future of money, goes live today at 9 a.m. ET.

Starting off with a keynote speech from Ethereum co-creator Vitalik Buterin, the virtual event will also see appearances from MakerDAO Co-Founder Rune Christensen, Gauntlet CEO Tarun Chitra and CFTC Chairman Heath Tarbert, among many, many more. 

The most in-depth conference to date dedicated to the Ethereum economy is a gated event. You can register now to gain access to the day’s panels as well as video-on-demand content released in the coming days. 

Related: First Mover: Privacy Is Litecoin’s Ace in the Hole as JPMorgan Touts Bitcoin

First, a few words from Leigh Cuen. 

Value proposition?

The fully virtual CoinDesk invest: ethereum economy is kicking off with a keynote from none other than Ethereum creator Vitalik Buterin, delivering a speech titled “Eth 2.0 and the Road Ahead.” This raises the question of whether people should invest in a project that failed to scale the first time around. The answer may be more complicated than a simple yes or no. 

The fact is, Buterin and dozens of his co-founders created something real, a robust community that ships code, lobbies lawmakers, tests and uses products, broadcasts marketing materials and orchestrates live events. 

Sure, Buterin and Ethereum co-founder Joseph Lubin subsidize this community development through organizations like ConsenSys and the Ethereum Foundation. But there are plenty of people taking on such responsibilities for themselves, without any direct connection to the founders.

Related: If This New Tech Works, You Won’t Need 32 Ether to Earn Staking Rewards

The real question is, can a volunteer community that reaches *beyond* the traditional tech industry make reliable software? 

Many skilled and experienced technologists contributed to Buterin’s Eth 2.0 roadmap, but the community’s diversity is also a hindrance. These people have different goals and skill levels. Computer systems rely on simplicity, not complexity. Complex systems break easily. In order to work efficiently, Ethereum’s builders may need to prioritize and focus with more rigor than they did in the past.  

The first version of Ethereum built a proof-of-concept using a new software toolbox, with all kinds of gadgets. That initial model was uneconomical to use in times of high traffic, which isn’t ideal for any “mainstream” platform. 

Will people use the Eth 2.0 toolbox to build a sturdy, secure platform? Or will it remain a playground of unicorn-themed experiments with friends? Even for a trust-minimizing technology, Ethereum’s long-term value is reliant on trust in the community’s ability to focus and deliver. This event, Invest: Eth, is their pitch to the public on their competence to do so.

What not to miss

Here’s a quick guide to the virtual panels you won’t want to miss. 

9:00 a.m. – 9:30 a.m. ET. Keynote: Eth 2.0 and the Road Ahead
Vitalik Buterin will discuss the future of the “world computer,” why the transition from Proof-of-Work to Proof-of-Stake consensus is necessary to fulfilling its mission and how the Ethereum community will get there.

10:00 a.m. – 10:30 a.m. A New Age: A Primer on Eth 2.0 Monetary Policy and Game Theory
Delphi Digital’s Alex Gedevani will break down Eth 2.0’s new monetary policy and incentive structure fundamental to understanding Ethereum as an investment opportunity. 

1:00 p.m. – 1:30 p.m. Can CeDeFi Eat the World? CZ Talks 1:1 With Leigh Cuen
Binance CEO Changpeng Zhao offers a vision for the centralized exchange he built to cannibalize itself. By promoting decentralization on all fronts  and relying on the BNB token for value accrual, Binance Chain has quietly become among the most important chains in the ecosystem. As the DeFi economy ramps up and fierce competition from both centralized and decentralized counterparts continues to mount, can Binance’s “CeDeFi” ambitions prevail? 

2:00 p.m. – 2:30 p.m. Wall Street and Off-Chain ETH
Grayscale’s Michael Sonnenshein, ErisX’s Thomas Chippas and OKex’s Lennix Lai will discuss the fundamental value proposition of ether and the litany of tokens and financial products Ethereum has wrought. 

2:45 p.m. – 3:00 p.m. Trade Secrets: The “Triple Point” Bull Case for ETH
David Hoffman of Bankless argues that, with the migration to Eth 2.0 and the implementation of EIP-1559, ETH is poised to become the world’s first “triple point” asset – one that creates value through being locked in DeFi, staked or consumed outright. 

3:30 p.m. – 3:45 p.m. Trade Secrets: Fast and Cheap – Why Sam Bankman-Fried Chose to Build on Solana
SBF lays out the calculus behind the decision to move Serum from Ethereum to the Solana blockchain and what might happen to Ethereum if faster and cheaper alternatives catch on.

4:30 p.m. – 5:00 pm Stablecoins, Hyper-Collateralization and the DeFi Economy
The rise of fiat- and algorithm-backed stablecoins has largely put crypto’s volatility narrative to rest. Now, they have become the bridge into the DeFi economy as well as an engine of hyper-collateralization and “money games.” Circle CEO Jeremy Allaire will discuss these programmatic tools with Aave’s Stani Kulechov and dYdX’s Antonio Juliano.

9:00 p.m. Keynote: Andre Cronje + Ian Lee (Ideo CoLab)
DeFi luminary Andre Cronje and IDEO CoLab Managing Director Ian Lee will appear for a late night discussion. 

The ledger

Camila Russo, the founder of The Defiant and the author of “The Infinite Machine,” writes about the “internet of value” being built on or using Ethereum. This section has been excerpted from its original. 

Decentralized web

The internet is at the cusp of entering a new phase, one where entrenched rulers are dethroned, more power is reclaimed by individuals and value moves as freely as cat GIFs.

To understand why we need a better internet in the first place, consider this question: Isn’t it weird the internet isn’t good at money? Think about it. The applications we use every day to search, to communicate, even to shop; the companies that dominate the web are very bad at dealing with money, even if they’re very good at making it. There’s a separate checkout process, where you repeatedly enter all your information. Cards issued in some countries don’t work on local websites in other countries. Sometimes you wait for what feels like an eternity watching that tiny wheel turn, to have the transaction fail. 

More complex transactions are almost unthinkable. Influencers and creators should be able to monetize their likes, retweets and views, with micropayments streamed from followers, without any platform taking a cut. Less-famous mortals should get paid if they opt in to view ads or consent to sharing their information. Transferring ownership of valuable assets, from art to real estate, shouldn’t take several intermediaries and tons of paperwork.

There’s the internet’s TCP/IP protocol. There are apps built on top of it. And, separately, there’s the financial system, which relies largely on infrastructure built before the internet was invented. SWIFT, IBAN, the rails handling most international money transfers, weren’t designed to handle actual money. They’re messaging systems where transfers can take up to five days and cost around $50. National money transfers fare a bit better, but in the U.S. they still take at least one business day to settle (money rests on weekends, apparently). 

Attempts to update these systems – SEPA in Europe, the Faster Payments initiatives in the U.S., VisaNet for card payments – have resulted in a messy patchwork that doesn’t solve the core problem. Fintechs try to improve the situation, but they’re building on the same old carcass.

At a time when we have global, cheap, fast communications, we should have an equally global, cheap, fast financial system.

An internet of value
The internet is ruled by innovation-stifling monopolies that have stopped us having an internet-of-value. Organizations built on top of the current internet network have almost no other option than to become for-profit corporations, with code that’s proprietary and closed to the public. But when the network itself is designed to transfer value, it enables different business models to emerge. 

In this new frontier, users retain control of their funds and their personal information. They roam freely without bowing to any king. Value – that is, money, assets, securities, property – is as native to internet apps as cat videos. And it’s already happening.

This is not about “crypto.” It’s not about the next bitcoin, or getting in on the next hot token that will pump. 

This is about a shift in the very foundation of the web.

There is a money layer that’s being added on top. A distributed network that transfers value without relying on banks, settlement and clearing agents. Money moves faster, cheaper and globally – just like the rest of the internet does. 

And this network isn’t only good at transferring value. It can also process anything a computer can, allowing developers to build applications on top. The difference from the internet apps we’re used to is that in these applications value isn’t an afterthought; it’s at the very core. The name of this new base layer for value is Ethereum. 

Payments can be made seamlessly, and that’s just the start. More complex financial services are now at the fingertips of anyone with access to the network. Users can trade tokens at a few taps, and because value can be programmed this can range from the network’s native token ether, to synthetic representations of everything from gold to a Tesla stock. It can even tokenize San Francisco’s “poop index,” where people can profit from the city’s rising number of feces sightings. 

Venezuelans can buy tokens linked to the value of the dollar. And not only that, they can deposit them in lending protocols and earn interest on those tokens. Speculators can borrow from those asset pools to trade. Others can have a computer program automatically execute a trading strategy, like a robo-adviser on steroids. There’s a no-loss lottery, streaming salaries almost by the second, tokenizing and trading limited-edition T-shirts, which are delivered in their physical versions, and can also be worn in virtual reality worlds. 

For developers, financial applications are the low-hanging fruit to build on top of a value network, but it’s only the beginning.

DeFi on Ethereum has taken the crypto world by storm this summer and set the stage for the long anticipated ETH 2.0 transition, expected to begin in late 2020. 

Let’s face it: These protocols can be rather clunky and difficult to use, and that’s a big turnoff for new entrants into the ecosystem. At #investeth Unlocked, you’ll leave with a high-level understanding of where the Ethereum and DeFi ecosystems are heading and how you can utilize these tools on their own. Before you register for invest: ethereum economy, here’s a primer on the journey to Ethereum 2.0.

Who won #CryptoTwitter? Related Stories

• Tokenized Staked ETH Will Replace ETH – And That’s a Good Thing
• Ethereum-Enhancers Not Ethereum-Killers

A relic from Bitcoin’s early days, a “brainwallet” refers to a private key that is stored in the user’s memory either in the form of a seed phrase or a password, essentially giving you a portable “bank account” locked inside your head.

• Once you have the private key memorized, the rationale goes, you can access your bitcoin wallet from anywhere in the world, as long as you have internet access. It’s especially useful if you need to get out of Dodge quickly; your bitcoin will always be with you.
• To create a brainwallet, you can generate a new address using Bitcoin wallet software, memorize the seed phrase associated with the address using a mnemonic trick, and then delete the wallet from your computer or smartphone.
• You can also generate the private key yourself using bitcoin software specifically designed for creating brainwallets. This will create a wallet using whatever passphrase you choose to represent your private key. However, this method of generating a brainwallet is highly insecure for a number of reasons (poor entropy, for example) and is generally discouraged.
• Since brainwallets rely on the user remembering a passphrase, there is always the risk that you’ll forget it or, in the case of a user-generated phrase, that it will be easily guessed.
• To demonstrate how vulnerable user-generated passphrase wallets can be, depending on the quality of the password, an anonymous BitMex researcher generated eight wallets using quotes from popular literature, lyrics from a Bob Dylan song and an excerpt from Bitcoin’s white paper. Impressively, the “Call me Ishmael” wallet, derived from the notable opening line in Herman Melville’s “Moby-Dick”, was harpooned by a hacker literally the second it was created.
• For the others, all were swept within the day. The quote from the Bitcoin white paper took the longest to crack at roughly 13 hours.
• BitMex Research believes a single entity swept the wallets.
• “The speed and nature of the redemption of the funds clearly indicates that people have servers up online 24/7 scanning the blockchain and their respective memory pools for weak brainwallets to hack. These servers are likely to have pre-generated many hundreds of thousands of Bitcoin addresses, using text from thousands of published works, music, books, academic papers, magazines, blogs, tweets and other media and then stored these in a database,” the post reads.
• When generating a brainwallet, BitMex Research suggests composing a medley of words and phrases to create a more complex passphrase rather than relying on something “simple and poetic.”

Related Stories

• First Mover: Privacy Is Litecoin’s Ace in the Hole as JPMorgan Touts Bitcoin
• Bitcoin Steady Above $11,400 as Hashrate Reaches New High
• Market Wrap: Bitcoin Slips to $11,300; Ether Locked in DeFi Is Flat
• First Mover: Stimulus Winning as Biden Surges in Polls and Bitcoin Eyes $12K

Digital asset manager Grayscale Investments has posted its best quarterly results to date, having brought in just over $1 billion in investment across all of its cryptocurrency products.

• In its financial report for Q3 2020, the company – which is owned by CoinDesk’s parent firm Digital Currency Group – said it had seen inflows of $1.05 billion across all products.
• For the year so far, the figure stands at $2.4 billion, which Grayscale said is more than twice the total amount raised for the years 2013–2019.
• Its most popular product, the Grayscale Bitcoin Trust, saw inflows of $719.3 million in the third quarter, while bitcoin assets under management (AUM) have grown 147% in 2020.
• Crypto products excluding the Bitcoin Trust made a 31% contribution to the $1 billion total in Q3.
• Grayscale’s trusts for litecoin and bitcoin cash, and its “Large Cap Fund,” all saw inflows rise by 1,400% from quarter to quarter.
• The company said 81% of investment in Q3 came from institutional investors, while 57% of investment came from those investing in multiple products. That reflects a broadening of interest outside bitcoin, the company said. 
• Grayscale had around $5.9 billion in assets under management across its 10 products as of Sept. 30.
• Edit (13:40 UTC): Corrected erroneous investment amount in first paragraph.

Also read: Bitcoin and Ether Rally After Grayscale’s ETH Trust Becomes SEC-Reporting

Related Stories

• If This New Tech Works, You Won’t Need 32 Ether to Earn Staking Rewards
• WEF Releases Report Assessing Global Blockchain Standards
• Gate.io Unveils Hardware Crypto Wallet With Fingerprint Authorization
• Coinbase Chief Compliance Officer Departs Amid Wider Exodus

Litecoin (LTC), a nine-year-old cryptocurrency whose price returns have chronically underperformed the bigger and better-known bitcoin in recent years, is hitching its wagon to a new star: privacy.

The blockchain industry subsector of “privacy coins” – cryptocurrencies with embedded technology that shields identifying information from public view – is becoming one of this year’s hottest buys. One of the biggest privacy coins, zcash (ZEC), which offers “shielded transaction” capabilities, has nearly tripled so far in 2020, while monero (XMR), which uses a technique called “ring signatures” to obscure sender and receiver data, has doubled. 

Litecoin founder Charlie Lee told CoinDesk in an interview the project is now looking to adopt key privacy-enhancing features, which he sees as increasingly attractive to cryptocurrency users. The enhancements are already being tested, and an upgrade to the main network is scheduled for next year.  

If the effort succeeds, it might inject a jolt of enthusiasm into a project that has suffered from a lack of momentum in digital-asset markets. Litecoin is up 21% this year after a 38% gain in 2019, which pales in comparison to bitcoin’s 59% year-to-date gain and a 94% increase last year.  

Related: Blockchain Bites: Your Guide to Invest Ethereum Economy

“I want to make it so that users don’t have to worry about giving up their financial privacy by using litecoin,” Lee said. “Even if you’re not doing anything illegal, you don’t want people to know how much money you have or what your paycheck is.”

– Daniel Cawrey

Read More: In Effort to Differentiate, Litecoin Makes a Move to Privacy

Bitcoin Watch

Bitcoin is hovering near $11,400 at press time, having snapped a six-day winning trend with a 1% drop on Tuesday. 

Related: Brainwallets: The Bitcoin Wallet You Probably Shouldn’t Use (Unless You Have To)

Notably, the cryptocurrency formed an “inside day” candle on Tuesday, aborting the immediate bullish technical outlook. Inside day candle occurs when the cryptocurrency trades well within the preceding day’s high and low and indicates consolidation. 

As such, Tuesday’s high of $11,567 is now the level to beat for the bulls. A break above that level would signal a continuation of the recent rally and open the doors for resistances above $12,000.

Alternatively, acceptance under Tuesday’s low of $11,314 would imply a bearish reversal and could yield deeper declines. 

That said, the on-chain metrics favor a continued rally. The seven-day average of bitcoin’s hashrate or measure of the processing power dedicated to the blockchain rose to a record high of 144.29 exa hashes per second (quintillion hashes per second) on Tuesday, surpassing the previous peak of 143.19 EH/s observed on Sept. 18, according to data source Glassnode.

It indicates high miner confidence in the cryptocurrency’s price prospects. Miners largely operate on cash and liquidate their BTC holdings to fund operations. As such, they are likely to dedicate more resources to the computer-intensive mining process if they are bullish on price.

– Omkar Godbole

Read More: Bitcoin Steady Above $11,400 as Hashrate Reaches New High

Token Watch

Bitcoin (BTC): Giant money manager Fidelity pitches bitcoin as “alternative investment.”

Ether (ETH): Ethereum’s network upgrade (Eth 2.0) is expected soon and could address scaling issues associated with its legacy platform.

What’s Hot

JPMorgan calls Square’s $50M bitcoin investment “strong vote of confidence” for the cryptocurrency (CoinDesk)

Bank of Russia seeks limit on amount of digital assets retail investors can buy (CoinDesk) 

Blockchain could give $1.7T boost to global economy by 2030, PwC report says (CoinDesk) 

New cVIX index tracks crypto market volatility (CoinDesk) 

The saga of Blue Kirby shows DeFiers are a trusting lot, until they’re not (CoinDesk)

Coinbase chief compliance officer departs amid as CEO’s “apolitical” stance proves political (CoinDesk)

Nasdaq-listed Marathon Patent teams with Beowulf Energy to co-locate bitcoin mining facility in Montana (CoinDesk) 

Lesson of third quarter is that crypto is “still a retail dominated industry,” The TIE’s Joshua Frank writes (eToro/The TIE)

BitMEX charges show that days are gone when innovators could “take a lackadaisical approach to regulatory and legal compliance” (Arca)

Coin Metrics analysis maps BitMEX execs Arthur Hayes, Ben Delo and Samuel Reed to their respective withdrawal keys (Coin Metrics):

Analogs The latest on the economy and traditional finance

IMF’s Tobias Adrian sees risk of “sharp adjustment in asset prices or periodic bouts of volatility” (IMF)

BlackRock’s Larry Fink sees future with just 50% of workers in offices (Bloomberg)

Argentine president says government has no intention of devaluing country’s currency (Bloomberg)

Chinese tech hub Shenzhen toys with digital yuan pilot program (SCMP)

Interest rate cuts in U.S. and elsewhere have China buying hitherto “unattractive” government bonds from Japan (CNBC)

Environmental, social and governance concerns could take toll on stock valuations, ValueAct’s Jeffrey Ubben says (Reuters)

Tweet of the Day Related Stories

• If This New Tech Works, You Won’t Need 32 Ether to Earn Staking Rewards
• Bitcoin Steady Above $11,400 as Hashrate Reaches New High

Blox, a non-custodial Ethereum 2.0 staking platform, is developing a solution that will allow users to pool their ether (ETH) cryptocurrency to get past the threshold required for staking when the upgraded network goes live.

• The cryptocurrency accounting service provider announced on Wednesday it is working alongside the Ethereum Foundation to develop “secret shared validator” nodes.
• By creating a network of decentralized staking pools, Blox said it would allow users to aggregate their ETH and reach the required 32 ETH to stake on the network.
• “Allowing ETH stakers to join the network and generate rewards with any amount of ETH is pivotal for making Eth 2.0 accessible for everyone,” said Blox’s CEO Alon Muroch.
• Staking on Eth 2.0 requires a minimum of 32 ETH in order to participate and is expected to see an estimated 4.6%-10.3% rate of return on a user’s initial stake.
• According to Blox, the entire process is “completely decentralized” and will enable “maximum security” for the Ethereum network and for those users looking to stake on it.
• The long-anticipated Eth 2.0 upgrade will reshape the world’s largest smart contract platform as it transitions from proof-of-work (PoW) to proof-of-stake (PoS).
• The move away from PoW to PoS is designed to improve upon Ethereum’s scalability issues stemming from its inability to handle a large number of transactions.
• Muroch will discuss the initiative in greater detail on Wednesday at CoinDesk's invest: ethereum economy virtual conference.

See also: 3 Things You Should Know Before Staking on Ethereum 2.0

Related Stories

• Blockchain Bites: Your Guide to Invest Ethereum Economy
• Grayscale Announces Best Ever Quarter With Over $1B Raised
• First Mover: Privacy Is Litecoin’s Ace in the Hole as JPMorgan Touts Bitcoin
• WEF Releases Report Assessing Global Blockchain Standards

The Department of Justice (DOJ) just fired a warning to crypto exchanges worldwide: Comply with U.S. law or face the potential wrath of the federal government.

Last week, the DOJ published an 83-page cryptocurrency enforcement framework detailing its approach to the nascent space and discussing potential crimes. The document also suggested the U.S. government would enforce its laws regardless of where exchanges – referred to as virtual asset service providers, or VASPs – are based. In other words, these exchanges should comply with U.S. laws – even for their non-U.S. customers:

“The Department also has robust authority to prosecute VASPs and other entities and individuals that violate U.S. law even when they are not located inside the United States. Where virtual asset transactions touch financial, data storage or other computer systems within the United States, the Department generally has jurisdiction to prosecute the actors who direct or conduct those transactions.”

Related: The DOJ’s ‘Crypto Enforcement Framework’ Argues Against Privacy Tools and for International Regulation

The document came just days after prosecutors with the U.S. Attorney’s Office for the Southern District of New York (SDNY) brought charges against crypto trading platform BitMEX, which is headquartered in the Seychelles, and its leaders, some of whom do not reside in the U.S. 

“I do think this is definitely a warning shot about cryptocurrency exchanges that are located outside the U.S.,” Marta Belcher, special counsel to the Electronic Frontier Foundation and general counsel at Protocol Labs, said of the framework. 

Interpreted broadly, the DOJ’s framework can also have implications for international exchanges that may have – or at one point, had – customers in the U.S. Exchanges that pulled out of the U.S. may not be safe either, based on the BitMEX charges.

That’s not to say every exchange operating outside the U.S. is at risk, or that the federal government is declaring open season on platforms it believes should be complying with its laws. Still, overseas exchanges that might have exposure to the U.S. should take note. 

Global reach

Related: DOJ Warns of Possible ‘Oncoming Storm’ in Report Detailing Dangers of Terrorist Use of Crypto

The DOJ framework notes that the U.S. has had anti-money laundering/countering the financing of terrorism (AML/CFT) measures for decades, with specific standards around cryptocurrency exchanges and activities since at least 2011. 

Despite this, many VASPs, as the U.S. government refers exchanges – still do not necessarily comply with the Bank Secrecy Act or other laws, the framework claimed. The framework complained that some exchanges might hold U.S. customers to standards that do not apply to non-U.S. customers, or might treat crypto-to-crypto transactions differently from crypto-to-fiat transactions. 

“Because of the global and cross-border nature of transactions involving virtual assets, the lack of consistent AML/CFT regulation and supervision over VASPs across jurisdictions – and the complete absence of such regulation and supervision in certain parts of the world – is detrimental to the safety and stability of the international financial system,” the framework said.

Jake Chervinsky, general counsel at Compound Finance, tweeted that policy makers are looking to tighten global restrictions on the trading of digital assets, in a change from how the crypto space was previously viewed. 

In the DOJ’s view, international regulations should be consistent, the document said. 

Read more: Crypto ‘Gray’ Markets Could Be Unintended Consequence of FATF Travel Rule

The new framework follows a pattern. Since 2018, the U.S. has spearheaded efforts to unite global regulatory efforts around cryptocurrency exchanges and transactions through its presidency of the Financial Action Task Force (FATF), an intergovernmental standards-setting organization. 

Last June, when the U.S. was president, the FATF unveiled the so-called “Travel Rule” for VASPs, advising regulators to require exchanges hold or be able to access comprehensive KYC data, even for individuals receiving funds from a transaction but who weren’t their own customers. The FATF is composed of representatives from the Group of 7 nations, and the presidency rotated between member nations every year at that time.

Implementation of the travel rule is ongoing. Some countries already require strict KYC, while others are still determining what compliance might look like. Switzerland, for example, requires exchanges to verify personal wallets before allowing customers to withdraw their crypto. 

In practice

The U.S. has gone after non-domestic platforms in the past. The Commodity Futures Trading Commission (CFTC), Securities and Exchange Commission and Federal Bureau of Investigation charged 1Broker, a crypto product exchange based in the Marshall Islands, on claims that it allowed U.S. customers to trade on its platform. 

1Broker later settled the charges with the two agencies, allowing customers to withdraw funds through the end of 2019 before shutting its doors. 

Earlier this month, the SDNY and the CFTC unveiled a variety of charges against BitMEX, one of the world’s largest crypto derivatives trading platforms – based in the Seychelles – as well as owners Arthur Hayes, Ben Delo and Samuel Reed. (SDNY brought an additional charge against Gregory Dwyer, an employee.) 

Both agencies allege U.S. residents were able to trade on BitMEX, despite the company not registering as a futures commission merchant, derivatives contract market or swap execution facility with the CFTC or conduct know-your-customer processes in compliance with the Bank Secrecy Act. 

Read more: OFAC Warns That Firms Helping Victims With Ransomware Payouts Risk Violating Its Rules

According to the indictment, the DOJ is alleging the defendants violated the Bank Secrecy Act and conspired to violate the Bank Secrecy Act across two separate charges. These charges could face criminal penalties, including jail time in addition to monetary fines.

“Beginning no later than November 2014 and continuing to the present (the ‘Relevant Period’), Defendants have offered commodity futures, options, and swaps on digital assets, including bitcoin, ether and litecoin, to persons in the United States, from offices in the United States, through the website www.bitmex.com and a mobile application,” the indictment said.

Speaking at the Digital Asset Compliance & Market Integrity Summit hosted by Solidus Labs last week, CFTC Commissioner Dan Berkovitz hinted the agency may go after other platforms that violate U.S. law in some way – even if they aren’t based in the U.S. 

“I think it’s very clear that if you’re operating outside the boundaries of the law and what the law requires, we will aggressively enforce it,” he said.

Future views

Berkovitz’s comments, alongside the enforcement framework itself, seem to be implying the BSA, a broad AML/KYC-focused law, are applicable outside of the U.S.

In other words, any transactions that might fit into the U.S. regulatory framework is fair game for enforcement, he said, a view the enforcement framework appeared to endorse. 

“They’re extremely explicit that they feel they have authority to prosecute them if they violate U.S. laws even when they’re not located in the U.S.,” Belcher said. “There’s a pretty long section where they, I think, make it pretty clear that is a thing they are contemplating.”

Read more: A New Bill Proposes to Put US Crypto Exchanges Under a National Framework

This should not be a surprise, she added, saying this is at least “one takeaway” from the simple fact the paper was published.

The framework even acknowledges the DOJ’s past international efforts, saying the agency has  “actively participated in international regulatory and criminal enforcement efforts” in the past. 

The DOJ, alongside its law enforcement and civil agency partners, is likely to take advantage of this perceived authority. 

“Where the law is clear, we will enforce it,” Berkovitz said.

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The Bank of Russia published several regulatory proposals clarifying how the central bank will be regulating digital assets in the country. Russia has already passed a law about the issuance of digital securities, which includes cryptocurrencies.

Most notable, the Russian central bank wants to limit the amount of digital assets non-qualified investors can buy in a year.

According to the proposal, published by the Bank of Russia on Wednesday, non-qualified investors would be able to buy no more than 600,000 rubles worth of digital assets in one year, or about $7,740. Qualified investors won’t have to abide by this limit. The Bank of Russia expects to get public feedback on the proposal until Oct. 27.

Related: Digital Ruble Can Help Track Government Spending, Bank of Russia Says

To be considered a qualified investor, one must satisfy one of the following five criteria:

• Have a net worth of no less than 6 million rubles (~$74,400)
• Own securities totaling more than $74,400
• Have experience working in a financial organization over two years
• Regularly trade significant amounts of securities
• Have a degree in economics

This only applies to the digital assets issued by companies registered with the country’s central bank, not cryptocurrencies.

“This document only touches the digital assets that will be issued under the new law on the digital assets,” crypto-savvy Russian lawyer Mikhail Uspensky told CoinDesk. “Such tokens don’t exist yet, so the document is written for the future. The law will only come into force in January [2021], and cryptocurrencies are not mentioned in it at all,” he added.

The Bank of Russia also published a separate proposal on how the digital assets issuers should register to issue tokens legally, a document on how it will be issuing electronic signature keys for such companies and another one saying that digital assets issuers will be subject to the same rules regarding their accounting practices as other financial companies.

Related: Bank of Russia Considers Issuing Digital Ruble, Starts Public Consultations

Russia’s main financial regulator has ramped up its work regarding digital assets recently: On Tuesday, the Bank of Russia issued a report on the potential launch of its own central bank digital currency (CBDC), the digital ruble. The details of the project and whether it will ever be launched are yet to be decided.

Also read: Digital Ruble Can Help Track Government Spending, Bank of Russia Says

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Bitcoin (BTC) is consolidating recent gains alongside a record hashrate that suggests high miner confidence in the cryptocurrency’s price prospects.

• The top cryptocurrency is currently trading largely unchanged on the day near $11,400, CoinDesk data shows.
• Prices clocked a high of $11,723 on Monday, having crossed into bullish territory above $11,200 over the weekend.
• The bitcoin breather comes as seven-day average of the cryptocurrency’s hashrate – a measure of the processing power dedicated to securing and recording blocks on the network – rose to a record high of 144.29 exahashes per second (EH/s) on Tuesday.
• That surpasses the previous peak of 143.19 EH/s observed on Sept. 18, according to data source Glassnode.
• Arcane Research said in a tweet that the record hashrate is a sign bitcoin’s fundamentals are stronger than ever.

• Hashrate has increased by nearly 40% this year, despite the “halving” event in May that cut miner rewards by half.
• A rising hashrate suggests increasing confidence among miners about the economic viability of operations – in effect more mining machines are coming online as companies invest in the technology.
• Miners largely operate on cash and liquidate their BTC holdings to fund operations. As such, they are likely to dedicate more resources to the computer-intensive mining process if they are bullish on price.
• The options market is also aligned for a bullish move, as noted by crypto derivatives research firm Skew.
• Bitcoin’s call options, or bullish bets, expiring in one, three, and six-months are drawing higher prices than the put options, or bearish bets.
• Analysts expect the cryptocurrency to tests the psychological hurdle of $12,000 in the near term.
• On the downside, support is seen at $11,000, followed by the February high of $10,500.

Also read: Bitcoin Eyes $12K Price After 6-Day Streak of Gains

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The World Economic Forum has teamed up with the Global Blockchain Business Council, an advocacy group, to assess the current state of blockchain technology.

• The Global Standards Mapping Initiative (GSMI), released Wednesday, is the most “comprehensive” attempt so far to survey blockchain technical standards, according to the organizations.
• The GSMI mapped data from over 30 technical standard-setting entities, 185 jurisdictions, and almost 400 industry groups.
• The report attempts to provide a snapshot of the current blockchain landscape by mapping current technical standardization efforts, identifying gaps and recognizing “next steps” for the industry.
• The initiative is designed to serve as resource to move the industry forward by combining industry trends and provide “action orientated guidance” for the public and private sectors.
• “The ecosystem is moving forward with designing and building for scale,” the report reads. “However, several questions critical to the success or failure of blockchain remain.”
• Those questions related to issues such as a need for increased education for regulators, fragmentation of approaches across different jurisdictions and premature standardizations.
• The findings of the report also included concerns regarding terminology and technical design choices for distributed ledger technology (DLT), as well as clarity and guidance for global actors.
• The initiative also comes in collaboration with notable entities working in blockchain, including MIT Media Lab, Accenture, and the Linux Foundation.
• Other collaborators include Hyperledger, ESG Intelligence, Global Digital Finance, ING Group, Six Digital Exchange, the Milken Institute, among others.

See also: Colombia, Deloitte, ConsenSys Sign On to WEF’s ‘Blockchain Bill of Rights’

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